Money Strategies with Debbie

Reverse Mortgage: Planning For Retirement

 

When planning for retirement, it’s important to consider your plans from every single possible angle because all your plans can go sideways in a second with one misstep. Whether it’s taking out insurance policies or making sure you safeguard yourself against some of the most common financial mistakes that could derail your retirement, you need to be ready for anything. “Dollar Diva” Debbie Bloyd dives into a hefty list of things you have to take note of when planning for retirement. Not everyone can just go easily and smoothly into retirement with the financial stability that they want and deserve. Make sure you have all your bases covered, and every single possibility considered.

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Reverse Mortgage: Planning For Retirement

Five retirement questions you have to have answers on before you plan for your retirement. Everybody needs to have any plan, but many may not have even considered discussing when they want to retire and therefore, they have no plan. Not having a plan is a terrible plan. You can read surveys everywhere. That shows if you don’t have a plan, you are sabotaging yourself and your family. I’ve made lots of plans and no, they don’t always work out. A plan means that I’ve had that discussion with myself. You have to sit down and have a discussion and talk about what your plans are, where do you want to live, and when do you want to start on the road to retirement. The reason that developing that plan is important is it processes everything. It helps you find out the real numbers and expenses that you’re going to have, and where do you see yourself most likely coming up short. When it comes up to filling those holes, it keeps you from running out of money.

Here are some of the questions. Number one, how long is your retirement going to last? When do you want to retire and when do you think you’re going to die? Nobody knows that answer, but this is why we look at our family, our health, and we have open and honest discussions. I found that most people don’t like talking about their mortality at all. They want to say, “When I feel like it.” This is the problem. Many of us are retiring early because of health problems or to take care of someone with a health problem. We don’t have as many years left working as we think. Therefore, we’re shoring up our retirement shorts and we’re going to have a problem with money at some point. We need to figure out when are we going to retire and how old do we think we’re going to be? My dad lived to 89. My mom passed away at 75. She had cancer and a heart attack. She had a double whammy. I’m 55, so I at least have another probably 20 to 30 years left. What am I going to do with that? I love what I do. I’m not physically exhausted or broken down. Some of my clients, they have been doing manual labor their whole lives and their body parts are wearing out. They are going to retire earlier than I have to. As long as I have my brain capacity, I get to keep working.

Let’s think about what happens if our spouse dies. Where are we going to go? Where do we want to live? A lot of people live in the same place because their spouse wants to and when their spouse passes away, it becomes a whole new ballgame. What size of house do you want? Where do you want to go? Do you want to live with your kids? Do you not want to live with your kids? Do you want to go to a retirement community? These are all things that we need to figure out so we know what expenses we’re looking at. Do you want to live with your kids? Probably not. Do they have a mother-in-law quarter? Are they ready for you? When would they be ready for you? These are the questions about how long your retirement’s going to last. If you say, “Debbie, I’m going to retire at 70. I think I’m going live to 85.” We have 15 to 20 years worth to keep your money lasting the way you want to spend it.

When will you be ready to retire? That’s another tough question because it’s not always financial. My dad retired at 56 in 1982. Back when they didn’t have anything but pension plans and his pension lasted until he was almost 85. The company never thought in their wildest dreams they’d still be paying him a salary even after he retired that long. Most of us don’t have pensions anymore. We have 401(k) plans, IRAs, mutual funds, CDs, and stocks, but we do have enough to pay for costly medical expenses when that is needed. Do we know when that will be needed? How do we know how much to set aside? Some people like me, I love my job. I love helping other people. I’m not going to retire early unless I’m forced to. We need to talk about, when will you be forced to retire? What years does that look like? Do you have a spouse that you may have to take care of? Do you have kids that you may have to take care of? Are you taking care of a mother-in-law or father-in-law? All of those can cut your time short working, which cuts your 401(k) contributions down and your IRA contributions.

You get to this great place called retirement. I’ve known many people to retire, only a couple of months and decided they have to go back to work because they’re bored. Is this answer is going to help you determine how much do you have to live on annually? Let’s say you’re staying around the house watching grandkids. Maybe you don’t need a whole lot of money, but if you want to travel and see the world, we might need more money. What if you have health concerns? We’re going to need more money. I have clients that are in great health. They’re not even considering long-term care. That’s something we’re going to go into next. It’s important to look at your health and figure out what you’re going to need. Don’t say, “I’m not going to need any of that. I’m going to die healthy.” I don’t believe you. I see too many of my clients need long-term care and they don’t have it. There are products out there to help you keep a steady money stream. Maybe you need to move your money around. These are all things we need to know. Do you need consistent money? Do you have a pension? Do you have Social Security? What do you have to work with? We don’t want to get by. We want to do better than get by.

Question number four, how will you manage if you have to quit early due to layoffs or health concerns or your spouse’s issues? The people that I see are having issues that are taking care of their parents, taking care of kids. Maybe you need to downsize. The best time to downsize and get a new mortgage is when you’re working so you can qualify for a mortgage. Do you need to get rid of that two-storey house? A second storey that you never use. Downsize into something more affordable and put that money to work for you. Question number five, how will you manage your nest egg? You must have a way or several ideas on how the cashflow is going to be every month and how it’s going to change your needs. People think that they can spend about 7% of their nest egg a year. Since it’s invested, they will be making it up. What if we have a down year? The market is going to change. It can change at any time. Are you prepared? What if you don’t take 7% out? The closing rate is 3%. Can you live on that?

The younger you are when you buy a policy, the more time the policy has to build, and the cheaper it's going to be. Click To Tweet

Many people don’t want to leave their salary behind and retire on a pension of 60% of that. Most people can’t make it on their salary, let alone 60% of it. Everybody needs to have a plan and if you don’t have a plan, it’s going to hinder everything else. Let’s talk about long-term care. That’s one of the things that our plan needs to include and you can say, “Debbie, I’ve got $5 million. I’m going to self insure.” Go ahead, but a lot of people don’t have $5 million. They don’t even have $1 million. I must tell you, long-term care, I purchased it when I was 50 years old. I’m a proponent. I got this hybrid policy that pays off if I die or if I need long-term care. You buy long-term care by the coverage amount for the length of time you need. None of us need it needs to know when we’re going to die because we don’t, but we do need to know what lies ahead. The trick is you have to make certain assumptions and then hope you don’t need those certain kinds of health care. How old were your parents? What is your medical history? What is your family’s medical history? This might indicate what you can expect.

My mom had breast cancer. My dad had lung cancer. He never smoked. It was second-hand smoke. He lasted, so he was 89. I’m thinking my time is going to be between my 70s and 80s. That means my money has to stretch a long time. Long-term care, you’re never going to die healthy. That’s rare that someone passes away in their sleep. You’re going to have hospice at some point. In my dad’s case, his mind was great, but his body was given out. He needed help getting up and down. He needed help with his medications. That’s what long-term care pays for. Long-term care policies can be different depending on your age, your intent for the policy, and how much you need and when you need it.

Long-term care refers to a type of skilled care or personal care service that you might need if you’re unable to care for yourself because of an illness, disability, or cognitive impairment like Alzheimer’s. Long-term care services can be provided at your home, in hospice, adult day care, nursing homes, and assisted living. The way I can help with your policy is first to find out how much coverage you’re going to need. Do you need it for you and your spouse or just you? Typically, spouses get this policy together. The coverage is great, but less expensive because if the first person uses it or doesn’t, it moves over to the next person. When the first person uses it all, then we have nothing left for the spouse, then we have a problem. It’s better to get a separate policy, even if you’re married, one for you and one for the spouse. Long-term care policies are based on your age and how much you want to spend each month on long-term care. The sooner, the younger you are, when you buy the policy, the more the policy has to build, the cheaper it’s going to be. I pay a couple of thousand dollars a year from my policy. If I wait any longer than that, it could be a couple of thousand dollars every quarter. It changes quite a bit.

Let’s see how much a facility or the help must cost in your town. This is why we need to know where we’re going to live and when we’re going to move. If I’m not going to stay in Dallas, I want to move to Wisconsin. Let’s see what long-term care costs up there. It’s going to be more expensive in LA, Florida, New York, or Chicago, but maybe it’s not as expensive in a rural community of Wisconsin. Let’s figure out where we’re going and then shop prices. In Dallas, the cost is about $7,000 a month. In Austin, it’s about $6,500. Shop around and see what it costs in today’s money. Let’s skip ahead to you’re 80 years old. For me, that’s about 25 years. What are the costs going to be then? How much can I provide a policy for? I purchased my long-term policy with a couple of writers. One writer or extras is for inflation. My policy coverage is going to increase by 3% a year. That keeps me up with inflation. My premiums will be the same forever and that is built into my price. I have another writer that converts what I don’t use from that policy that pays upon my death, like normal life insurance policies. Some insurance policies are either life insurance or long-term care. Mine is both. It’s a hybrid policy. That way, I get paid either way.

I’m not gambling quite as much. I’m not saying I need that $100,000 for long-term care. If I get hit by a bus, it pays off like a death benefit. It goes to my kids. I know that’s a unique way to look at your health care, but don’t put it off because 25 years is going to fly by before you know it. Prices keep going up. If you’re counting on just your 401(k), your Social Security or your kids helping out, then you better think again. You need a backup plan and that’s what I do. I work with backup plans. Let’s talk about another option when it comes to retirement. What happens if you can’t decide about anything? I don’t know where I’m going to live. I don’t know what my health is going to be like. I don’t want to talk about it. Indecision is a real killer. It kills great ideas for businesses. It kills relationships and it kills your retirement. If you can’t decide or won’t decide, it’s the same thing. You’ve decided not to decide. That means you’re going to take it as it comes. You can’t get certain policies after 70. You can’t get certain policies after 80. You can’t wait around. Decide to do something, decide to do nothing. Let’s talk about investing. If you said, “I’m going to put a little bit of side in my 401(k),” it’s not going to grow as much as if you paid attention to it, invested in and reinvested.

Put more in there all the time and then watch the funds that you were invested in. If you decided to invest in your company’s 401(k) or if you have an IRA, that’s great. You’re headed towards retirement. What are you going to do with that? Many people get stuck because they can’t decide. They don’t have a clear cut vision. I tried to write it down on paper. A lot of people are visual. This is what my Social Security benefit, my pay, my pension, whatever it is. This is the income coming in. What do I think the income is going out and what the expenses are? A lot of people don’t do that. Why are they going to do that for their retirement? Because we need to plug up those holes. You need to have insurance. You have insurance on your car. If something happens, do you have insurance on your house? Why is it then that most people can’t decide when it comes to their vision of retirement?

 

I help a lot of my clients try to refocus and figure out where they’re going. They don’t always like to talk about it. It’s something for discussion. Even if you plant that seed, you will go in the direction that you think. People are stuck, it’s either because they don’t understand or they don’t want to see themselves using the insurance we’re talking about. Everyone’s stressed out when making big decisions. If I can get people to talk about their ideas and plans, I’m verbalizing their wishes and putting a number on it. To me, it’s not emotional. I’m outside the emotions. I understand your emotions, but I’m a certified senior advisor. That means that I’m specialized in talking to people regardless of their age. I know what happens when people age. They shut down. They quiet down. They don’t want to discuss things. Parents were in that era of Baby Boomers at the early stages. They didn’t want to talk about any of it. You may have trouble talking about it too with your family. That’s when they bring me in because I talk logically. It’s not emotional for me. I talk to people every day about their money for mortgages, their retirement, life insurance, and long-term care. To me, it’s planning. We always need to have an exit strategy, so I’m trying to help you do that.

If you have trouble deciding your financial future with our advisor, if you even have one. If you have a problem with it and don’t feel comfortable talking, call me. Let me know what I can do to help you. That’s my job. I have been in the financial market for many years. I am a financial planner, a mortgage broker. I’ve been a mortgage broker since I started in the business and I also do insurance. I’ve done insurance for many years. Let me help you look at your family’s finances from above like a hawk’s view, way up high and see where some of the gaps are so I can help you. Let me give you a phone number that you can call me at, (979) 220-3018 or you can email me at [email protected]. Thanks for being with us and we’ll be back with more.

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I want to talk about things that we need to expect to happen in our lives we don’t want to happen. We need to plan for everything. Many people don’t plan. I’m a big planner. I’ve been divorced. That wasn’t in the plan and I have rebuilt my life several times. It wasn’t in the plan. My kids laugh at me. They go, “Debbie, you plan everything, but nothing goes to your plan.” That’s true. It doesn’t go to my plan, but I still have a plan. I get to change it. That doesn’t mean that you don’t plan because you think things are going to work out. You need to plan for everything. Let’s talk about some of the things that I planned for that you should plan for and things that can derail your retirement. I’m going to go through a lot of these quick because there’s a lot of them. We have seventeen to cover. There are always surprises, but we need to think about how are we going to handle things if things don’t go to plan? What if you lose your job? What if you have a heart attack? How much money do you have? These are all things that we need to talk about. We’re going to go in descending order down to the number one thing that derails your retirement. Number seventeen, the loss of capacity in your mind to where you require someone from outside the household to manage your money.

A cognitive decline and increased confidence in your ability can lead to financial mistakes. That means if you think you have it all together and you make bad decisions based on your money, you can run yourself in the poor house by bad investing. I know one man didn’t want a financial helper, a planner or an investor. He bought stock and sold stock his way. I said, “What is your way?” He goes, “I buy stock and if it goes down within three months, I sell it and I buy something else.” That’s not the right way. What that does is that locks in your laws. I said, “You would be better buying funds and let the fund managers do the work because I bet you, they’re a little bit smarter and better at that than we are.” He disagreed. He has a flawed investment plan and if he keeps doing that, he’s going to run out of money. Number sixteen is divorce. Divorce during your lifetime at any time it’s not easy to recover from, but nothing can ruin your expected income, like splitting it in half once you retired. I’ve seen both men and women in disbelief when their marriage dissolves and leaves a gap and living expenses for both. It can be too late to get a new job or change your investments to make up for the loss. One man retired a little bit early from his long job and after the retirement parties and all the fun. His wife announced that she was leaving him and she took half of his retirement.

He’s like, “Debbie, I would never have quit my job had I known she was going to take half? I would have kept working for 5 to 10 years that I could recoup some of that money.” It blindsided him. Number fifteen, significant damage to or loss of your home due to fire or natural disaster. Tornadoes can always go through an area and if you’re not properly insured or floods, maybe these things can happen. A house fire your neighbor’s house catches on fire. If you don’t have enough insurance or the right insurance, a loss like this could destroy your retirement because you’re going to take retirement money and fix your house. That shouldn’t be the problem. Insurance should make that possible to take you back home. If not, you don’t have the right insurance.

Number fourteen, loss of a home through foreclosure. Many people are one house payment away from this has safeguards in place to prevent this. Make sure you have a cushion or a plan. To me, that means you have six months of money set aside, so if something happens, you can keep going and get back up on your feet. Number thirteen bankruptcies. Many people in retirement would declare bankruptcy due to medical bills that arise from cancer, chronic health issue and loss of a job due to medical issues. Many women are left broke after they care for their spouses and their spouses abused of all the available assets and they can’t recover. They cannot keep making the house payments, all that’s left for their Social Security and then the pension.

An increased confidence in your own ability can lead to big financial mistakes. Click To Tweet

That’s not enough. A lot of those people, especially women that I deal with, have to sell their house and move to something else that they can afford. It’s not nice. It could have been different. Victimization by fraud or scam. The elderlies are especially susceptible to phone calls and mail scams. Protect your family, talk to your mom, make sure she’s not boarding stuff, buying it online, or having someone call and take money from her. When there is a natural disaster, people start doing phone scams and we have big donations set up. I’ve seen it all. Number eleven, loss and the total value of savings of 10% or more due to poor investment decisions. Nine percent of retirees, this happens too. Twelve percent of them are men. Eight percent are women.

Get help before you need it from a reputable professional that is licensed. I had one client come to me and she goes, “Is it a problem that my financial advisor wants to borrow money from me?” Number one, is that not illegal? Yes, it is. It’s illegal for me to ask a client to borrow money. Number two, if they’re asking you to borrow money, they’re not the people that you want to handle your money. Runaway and file a report. Number ten, death of a spouse or long-term partner. We know this is going to happen as we age, but are we ready for it? No. Many families don’t plan on losing a spouse or their income to the household. How are you going to take care of yourself, pay bills? What asset is going to be left to care for them? We need to plan for this.

Usually, the husbands die first and with them die their income unless they check the box where the pension goes to the spouse. It can be devastating to learn what people have done. They get more money for the short-term, but it doesn’t help them in the long-term. Number nine is family emergencies that can impact the amount able to spend on other things or they use 10% or more of savings. You need a sizable amount of money. I always say six months’ worth of living expenses. When I talk about a problem, I see a lot of families were under the aid of other family members and they put their retirement in jeopardy. I also see family members steal from adults, seniors, grandparents, they can have a drug habit or they can buy a new car. This does nothing but depletes grandma and grandpa’s money and they don’t care. They leave devastation in their path. Don’t let this happen to your family. Number eight, going on Medicaid. Not everybody is ready to sign up. It’s not a good thing to be on. You have to deplete almost all of your assets. If you plan on going on Medicaid, they pay for your long-term care, yes, but you don’t get to decide where to live or what type of conditions. It’s not desirable for most.

I’ve had clients come in and as their parents age say, “I’m going to liquidate all their assets or move money around. Help me so I can get my mom on Medicaid. I don’t want to have to pay for it. That’s my money.” It’s a bad outlook and if you move money around and your parent does go on Medicaid, it has the chance to look back for five years to see where those assets went. If you took them, you would be responsible for paying for them, be careful. Number seven is a sudden loss of the total value of savings. Twenty-five percent or more due to a fall in the market. Based on what’s been going on, we lost 35% of the market. It doesn’t bother me. I’m in my 50s. I have time to recoup. If I’m in my 70s and I’m taking money out and all of a sudden, I have a third less money, I’m going to freak out. You might too. What do we do for that?

If you freak out when the market moves, then let’s get you out of the market into something more stable with fewer risks. Number six, what goes hand in hand with the last one? Running out of assets, 15% of retirees, 16% of widows run out of assets. Fifteen percent of men and 23% of people over the age of 45 or 59. Why is it the last group? Those are massive years for heart attacks, strokes, not being able to recover from surgeries, illnesses. You can’t bounce back. You have to quit your job early. You’re running out of money because you didn’t plan on quitting when you did. It happens a lot. Number five, illness or disability that limited the retiree’s ability to care for himself or herself.

This happens to 22% of the widows and 20% of household incomes less than $35,000. They don’t have that cushion. We don’t plan on illness. We don’t plan on disability. It could not be health-related. They can be in a car accident and not able to work, a work-related accident. Worker’s comp only pays for much. You’re still living on less. Number four, a drop in your home value of 25% or more. You’re like, “Debbie, why would that happen? Everybody knows that home values go up.” No, they don’t. I’m in the mortgage business. I see it all the time. Maybe your neighborhood is running down. It’s not a desirable neighborhood anymore and you overstay your welcome. You stay there too long and the neighborhood is turned.

You’re not able to get what you think you should get for your money out of your house. Because when you sell your home, the people do an appraisal and that’s what sold around you like you. A lot of times when neighborhoods are on the downside is when people are selling, trying to get out. Also, people are buying at a reduced price that they can move into that neighborhood and turn things around. This is the history of how neighborhoods come and go, get revitalized but when you revitalize, it’s already been to the bottom. This happens with people’s largest asset is there home. You have to protect that. This goes hand in hand with another problem we’re going to talk about.

Number three, a significant out-of-pocket medical or prescription expense from a chronic health condition or disability that did not limit the retirees’ ability to care for themselves. It makes it hard. I have a client that has a unique form of arthritis but she’s got several other problems along with it. It’s crippling. She used to be on one type of medicine and they shift to medicines and it’s expensive. Thank goodness we have our money in a long-term annuity that allows her to withdrawal much money every month that can fluctuate. We can change that from month-to-month as we need to put her medical expenses are more expensive. She has enough to make it. What if you don’t? A lot of people will bankrupt themselves, go into foreclosure to pay medical prescriptions, but without those prescriptions that could end their lives because they’re afraid they’re going to run out of money. Another problem is number two, major dental expenses. You’re like, “What are major dental expenses?” Your mouth is the hub for all the germs and all the stuff, and sometimes people can look at your mouth and they can tell how healthy you are by looking in your mouth. If you have dental disease, gum disease, all those things, it leads to bad diseases in other places in your body. Your mouth is central to your eating, socializing, and group enjoyment.

 

If you lose your teeth without getting dentures or implants, you’re going to suffer emotionally because you’re going to distance yourself from family and friends and that can make a difference in your life. Another thing that goes hand in hand with this that I see as you’re hearing. If you can’t hear, you’re not going to go out to noisy places. You’re not going to go out to restaurants with friends or family. You’re going to not being loud places. You’re not going to be out. You’re going to stay home or you can hear well. It’s going to limit your socialization. As we age, we need to stay active. We need to stay with other people. It makes us happier and more productive. It makes us feel bad if we don’t fit in.

If your mouth, hearing or your eyesight goes, those are major things that need to be fixed. You’ve got to have either the medical insurance to do it or the cash. Number one, the major way that we get ourselves crosswise when it comes to our money is with major home repairs or upgrades. Everyone has the American dream to own their home, but that also makes you responsible for the upkeep. Heating and air conditioning are a must for most families. I’ve watched people take out loans to afford that new air conditioner or heater in their home. This is not illegal. I would rather you not pay high-interest rates on a heating and air conditioning unit when that should come out of your emergency fund.

Also, this is the leading way for families to go into foreclosure and bankruptcy because they are unable to pay for routine expenses on their home. They get upside down, then their house depreciates. It all snowballs. If you haven’t thought about these problems, you need to and say, “This could happen to me or this couldn’t. What could I do?” These are some of the things to look out for. I’ve got plans in place for some of these things. You should have that too. If you have parents that are going through all this, let’s see if we can reorganize their finances before it’s too late to prevent some of these things from happening. I’m in the financial planning world. I do mortgages and I do all types of asset protection through insurance and life insurance. Not every asset has to be liquid. Sometimes you need assets that are going to be there until you pass away or beyond, and that’s where insurance comes in. Please call me if you have any questions. I got an email address, especially for this little blog. Let me give you my email address. It’s going to be [email protected]. Thanks for being with us.